THE SMART MONEY: Decoupling financial services for cross-departmental big data integration
Like most industries, finance was forever changed by the explosion of big data-driven processing, its burgeoning data integration needs, and commonplace applications of elements of AI.
On the one hand, the monetary gains of data-substantiated trading or lending opportunities exemplify data’s potential for generating profit. On the other, threats of unparalleled regulatory consequences and pricey litigation typify its pitfalls.
Consequently, the choice for organizations operating in this space is as simple as it is vital. “We’re not putting the genie back in the bottle. Data is out there; it’s the smart money,” said Alex Kwiatkowski, principal industry consultant, global banking practice, at SAS. “Smart firms are those that can figure out how to use it without then—to use a sporting metaphor—having the referee blow the whistle or throw down the yellow flag.”
Monetizing data while complying with regulations in finance is increasingly dependent on the ability to decouple the enterprise—across departments, business lines, and individual services. Performing large-scale data integrations (making available mortgage and trading information for anti-money-laundering mandates, for example) has vast potential to transform how revenue is generated in financial services and other verticals.
Specific opportunities for capitalizing on what Kwiatkowski termed “unbundling the bank” include the following:
Open data: Financial services institutions have a wealth of customer information about spending habits, personal preferences, and tendencies. Those that integrate and analyze this data across domains can increase customer satisfaction and loyalty by offering relevant recommendations assisting customers’ personal finances.
Fintech: Although fintech companies represent threats to legacy organizations, they typify the need for rapid data integrations and optimal consumer experiences. These organizations usually specialize in a niche area of finance to deliver services in minutes.
Trading: Quickly integrating a variety of disparate sources (particularly alternative ones) is essential for making informed decisions resulting in advantageous trading. Conversely, this same approach is useful for monitoring trading activities for unlawful practices.
Customer 360: The holistic view of consumers provided by Customer 360 initiatives hinges on sharing information across business units so organizations understand who their best customers are, why, and how to service them in a mutually beneficial manner.
As the aforementioned opportunities reveal, optimizing the customer experience is implicit to the concept of unbundling the bank. Although big data integration in finance provides a fascinating case study, the pecuniary prowess of decoupling the enterprise to accelerate and diversify the services delivered is horizontally applicable—and quickly spreading to other verticals.
At a macro level, the open data movement is about empowering consumers with greater access to their data while making this information exchangeable across organizations, as long as it’s sanctioned by, and beneficial to, the former. Financial institutions, however, can readily capitalize on the bevy of information they possess about customers via “the ability to analyze spending patterns,” Kwiatkowski mentioned. For example, institutions have payment data about customers’ communication packages, which could include a broadband connection, some form of cable or satellite television, and cellular services. In this scenario, customers might be amenable to their data being used for their benefit if they were offered a sweeter deal on those services with a different provider.
In addition to the continual patronage such practices are likely to foster with customers, financial organizations can directly monetize them by referring consumers to subsidiaries, parent companies, or organizations with which they have strategic alliances. According to Kwiatkowski, such “openness in banking” is encouraged by regulators, as evinced by the EU’s revised Payment Services Directive. Additionally, it places a greater emphasis on data integration—knowing where customer data is and blending it with other data.